Good Luck Trying to Fix the Supply Chain Crisis

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“Complete Order” Totally messed up,” says Peter Cole, owner of Urban Plant Growers, an Australian ecommerce company. Two months after arriving in Sydney, Cole’s order for a $1.6 million hydroponic kit and light, packaged in two 40-foot shipping containers aboard a ship that sailed from Shenzhen, China, was still floating somewhere in the Pacific Ocean. Is.

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It never used to be like this. In earlier times, Cole’s kit was manufactured, shipped, and ready to sell to its customers in six weeks. Then everything broke.

Cole is not alone. A perfect storm of global issues combined to break the supply chain from time to time has kept the world running. From ever given getting stuck in the Suez Canal COVID-19 . For changing the way we shop, the world is also struggling with this China’s rapid move away from coal power, In response, a system that used to run relatively smoothly has now fallen into disrepair. “Any one of those that cause problems,” says Anda Breslin of ShipBob, a global fulfillment firm. “But all of them together have given rise to these bigger issues that we’re hearing about now.” The effects are huge, from price hike a for christmas gift Go on Black Friday Bargains, empty supermarket shelves, non-existent car sales, and a frantic grab For shipping containers are commonly used to pack and ship items around the world.

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Issues knocking the supply chain out of kilter run the gamut from heavy government interference to ports shutting down a global pandemic. But the best place to start is with politicians, says Mark Levinson, author of two books on shipping containers. “We had governments encouraging consumption in the face of a worldwide pandemic,” he says. For example, the UK has set a economic stimulus package In the summer of 2020 that was specially designed for people to shop on the high streets. In the US, stimulus checks sent directly to citizens result in Month-on-month growth of 4.2 percent in consumer spending in March 2021. We have also been encouraged to spend our money online, necessitating a rapid change in the way businesses operate. For decades, the retail industry’s reliance on shipping has led to Breslin being called “a beautiful fixture”: retail has grown by 2 percent each year; Retailers will publish two catalogs of new products every 12 months, allowing stores to pre-purchase their stock. “There was no flexibility built into the system,” Breslin says. “That complacency was born out of years of success.”

Then everything changed. We started spending far more money online, and the way we live our lives has changed. Everyone scrambled to buy a desk for themselves home Office, then ran on the patio furniture and flour, And they all have to be made and shipped from somewhere: China, which has just turned the epicenter of the pandemic, has the government determined to take a zero-sum approach to the virus. Cole had expected sales to increase over the Christmas period, but he does not yet know whether his goods will arrive in Australia for the holiday shopping season. “This is going to seriously harm our sales and the company,” he says. “If we don’t have anything we can’t sell anything.”

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Cole’s experience indicates a range of factors currently affecting the global supply chain. First, the goods were manufactured incorrectly, which coal suppliers blamed on the rationing of electricity in China as the country attempts to move away from coal power; Then Cole’s contacts in China could not find a cargo ship to fulfill the order. Cole believed that his two 40-foot shipping containers were to be loaded onto a ship near Shenzhen on November 13, but the items did not reach sea until November 19. “Even after leaving the port, this means there will be an 11-hour sailing between Shenzhen and Sydney, but they have added another three days,” Cole says. He is not sure if the items will still end up ashore, and this There is no guarantee that the Australian side will be smooth. “It usually takes two days to get goods from port to warehouse, but I’m not sure at all,” he says.

Levinson says the inability to accurately trace orders is an issue in the shipping supply chain, and it exacerbates wider issues. “Most shipments moving through the freight system have no real-time traceability,” he says. “That’s why things are scattered in the four winds and things have disappeared.” With ports closed due to the COVID outbreak, severe supply chain disruptions over the past year have added to the uncertainty – as happened in Ningbo, World’s third busiest port in August 2021In March 2021 for the temporary blockage of the Suez Canal, through which 12 percent of all global trade passes. China too 20 of its largest cities and provinces sought to reduce energy consumption Trying to meet environmental targets for the rest of the year, allowing factories and industries to operate for only part of the day.

Result? A global slowdown in the supply chain that has thrown everything into chaos – and made shipping items around the world more expensive than ever. “The economics of shipping are great for ship lines,” Levinson says. “They’re making record profits.” While shipping rates have long been unbalanced, costs have risen across the board, with the higher cost to ship shipping containers from Asia to Europe than from Europe to Europe. For example, shipping a 40-foot container from Shanghai to Los Angeles cost $1,700 in early August 2019. A year later, it had grown to $3,000. As of August 2021, it was priced at $10,200, according to data tracked by analyst firm Drewry World Container Index. Cole has previously paid about $2,500 to ship a 20-foot container from China to Australia. Now it is $5,500. “When I see the bills for my 40-foot containers, I get a little worried,” he says. “I don’t get the bills until the container lands in the port.”

At such high prices, many large businesses are avoiding the traditional shipping industry and doing it alone, it is more economical to do so. costco is Hired three container ships which will deliver goods from production facilities in Asia to the US and Canada, As do Walmart, Ikea and Home Depot. “Inflation factors abound,” Costco Chief Financial Officer Richard Galanti told investors while announcing the company’s most recent financial results. “High labor costs, high freight costs, high transportation demand, and port delays, rising demand in certain product categories, various shortages of everything from computer chips to oil and chemicals, and high commodity prices” retailer of all business has been affected. , Galanti said. Those who have not hired their ships are feeling the effects. Half of Lingerie Retailer Victoria’s Secret Products Stuck in the sea. The rest are being sent in – but it now takes nine days instead of two, as the race to shut down supply flights is causing a backlog there as well.

Nor is this issue going to be resolved anytime soon. Drewry predicts global shipping operations will Will not return to normalcy by the end of 2022– A conjecture backed by Breslin. It’s boom time for shipping operators, who are expected to earn $150 billion this year before interest and taxes. For everyone else, it’s a big headache. “People lost sales because they didn’t have enough stock to sell, or are sitting on too much stock,” Breslin says. “No CEO at a major retailer or brand would ever want to be in that position again.” The answer, he believes, is a wholesale reworking of how supply chains operate – the way he compares protocols to the Internet. prepared before in the late 1960s. “It was designed to be resistant to nuclear attack,” he says. Similar slack needs to be built into future supply chains, with leeway for near-term production, so that smaller supply chains can’t move markets as much as they have now.

Just as nothing can break a global supply chain, nothing can fix it. Governments are playing their part. “We see them tightening economic policy,” Levinson says. “We’re seeing signs that interest rates are going to go up, and that’s going to take some of the fizzle out of consumer spending.” But the fall in consumer demand will not undo the fundamental changes caused by the pandemic and the climate crisis. When the proverbial storm dies down, retailers push for change over lost stock and wasted investments: shorter shipping routes, more frequent stock updates, and potentially a shift toward pre-orders rather than on-time fulfillment. Push. It would be all too late for Cole, stuck with stocks at sea and the prospect of a skyrocketing shipping bill for items not likely to arrive in time for the holiday shopping season. “It hurt us a lot already,” he says. “But there’s not much we can do about it.”


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